Everyday low prices bite JB Hi-Fi profits

In a trading update, the company said it expected annual profit to drop to between $100 and 105 million, lower than market expectations of around $119 million, despite rising sales in the March quarter.

The company says it is heavily discounting stock to win customers and increase its market share, but the strategy is eating into its margins.

Chief executive Terry Smart says the pain for shareholders will soon end, as the discounts are unsustainable beyond the next quarter.

"And its not sustainable when you look at the quantum of those discounts that are actually being offered - anywhere from 30 to 50 per cent off computers, for example, or it's discounting to clear excess or damaged inventory."

JB Hi-Fi shares were the worst performer in lunchtime trade on the benchmark ASX 200 index, down 6.1 per cent to $10.06.

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